J.P. Morgan led Asia (ex-Japan)’s first sustainability-linked bond (SLB) with a $200 million note for Hong Kong-based property developer New World Development (NWD). The transaction was a further boost to the firm’s commitment to facilitate $200 billion to advance the objectives of the United Nations Sustainable Development Goals (UNSDGs).
The bond also marks a number of global firsts including becoming the first-ever USD-denominated SLB from a real estate issuer and the first unrated USD-denominated SLB.
J.P. Morgan acted as Joint Structuring Agent, Joint Global Coordinator and Joint Bookrunner in the landmark transaction. In an innovation for the region, the bond is linked to the issuer’s ability to meet sustainability targets set at the point of issue. If the targets are not met, the issuer suffers a commercial penalty. This differs to sustainability bonds where the proceeds go directly towards financing or refinancing sustainability or green initiatives and have been prevalent in the region since 2018.
In this transaction, NWD has set a sustainability performance target of achieving 100% renewable energy in its Greater Bay Area rental properties by FY-2025/2026. If the target is missed, the penalty mechanism kicks in requiring NWD to buy carbon offsets equivalent to 0.25% of outstanding amount of the bonds annually, until the bond matures.
Amy Tan, head of Debt Capital Markets Origination for Asia ex. Japan, said: “Issuing a sustainability-linked bond demonstrates that the issuer is not just paying lip service to ESG and is committed to meeting a defined set of sustainability targets in the medium to long-term horizon, or suffer real commercial consequence of not doing so.”
Amsterdam-based ESG ratings advisory Sustainalytics provided a second party opinion for NWD's sustainability-linked bond framework, confirming that it aligns with the Sustainability-Linked Bond Principles established by the International Capital Market Association (ICMA) this year.
By region, the Asia Pacific accounted for 82% of the investor base followed by EMEA with 18%.
Jessica Chen, Executive Director and regional ESG bond specialist, said: “As a region we are seeing greater demand from investors to put their capital to work in investments that are tied to ESG. The introduction of the ICMA principles will only work to further the role of global capital markets in supporting private and public sector efforts to achieve the UNSDGs.”
This latest transaction underscores J.P. Morgan’s leading role in SLB structuring and ESG finance where the firm was recently awarded IFR’s ESG Financing House of the Year for 2020. The firm also ranks #1 in Bloomberg’s 2020 global green bond league table and global sustainability-linked bond league table. Other landmark SLB transactions led by the firm include the world’s first SLB, for Italian energy group Enel, and the first SLB from an emerging market issuer, for Brazilian pulp & paper producer Suzano.
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